Regulators cracking down on ’90s-style, high-tech investment scams
WASHINGTON (AP) _ The glossy brochures touting partnerships in Internet shopping networks looked legitimate to Paul and Eloise Wood, an elderly couple living near Akron, Ohio, who sank $15,000 into the scheme.
The telephone solicitors who called the Woods beginning in December 1995 were ``very cordial and convincing,″ family friend David Kidd said. They even helped the couple fill out the paperwork, since Paul is nearly deaf and Eloise legally blind, he noted.
Kidd had to go to authorities on behalf of his friends, victims of what regulators call the latest trend in investment scams: sophisticated and creative ways of stealing people’s money suited for a high-tech age.
Struggling to keep up, federal and state regulators are cracking down on fraudulent telemarketing schemes involving cyberspace ``shopping malls,″ frozen animal embryos and other new-fangled areas _ as well as old standbys such as pyramid schemes.
Consumers, especially the elderly, lose an estimated $40 billion each year to telemarketing fraud of all kinds.
Paul Wood had a stroke earlier in 1995 and he ``wasn’t thinking straight″ when he got the call, Eloise Wood said in a telephone interview.
``He was just so caught up in this wonderful presentation they made,″ the retired teacher said.
No telephone listing could be found Wednesday for the company, World Net Development Group Inc., which authorities said had been located in Santa Monica, Calif.
In another alleged scam captured in undercover tape recordings, a phone solicitor promised returns of 57,000 percent.
The law enforcement effort, led by the Federal Trade Commission and securities regulators from 21 states and two Canadian provinces, has been under way for six months. It involves 61 separate cases, some of which likely will be referred for criminal prosecution, officials said.
Mark Griffin, president of the North American Securities Administrators Association, had this advice for consumers if they get calls promoting similar deals: ``Keep one hand on your wallet and hang up the phone.″
Some examples of what Griffin called ``a contemptible array of investment scams″ mostly offered through unsolicited phone calls: allegedly worthless oil and gas drilling in Kentucky; digital fingerprint technology in Indiana; ostrich-farming in Idaho; snail-ranching in Nebraska; retirement investments for the clergy in Maryland; interests in frozen embryos from an Ohio cow named Missy Cool; and $25,000 ``commercial promissory notes″ to build medical clinics in Hungary, a water treatment plant in Congo and roads in Bosnia.
``These frauds have become epidemic,″ said Teresa Schwartz, deputy director of the FTC’s Bureau of Consumer Protection. ``They are increasing in number and type. ... All these schemes are alike in one very important way: The only ones to profit are the scam artists.″
In the nine civil cases filed in federal court by her agency, investors may have lost more than $150 million, Ms. Schwartz said. Violations of the agency’s telemarketing sales rule _ which prohibits misrepresenting the risk, potential profit or other important aspect of investments _ carry penalties of as much as $11,000 each.
The states and Canadian provinces that have brought cases are Alabama, Arizona, Arkansas, California, Idaho, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Mississippi, Missouri, Montana, Ohio, Pennsylvania, South Carolina, Virginia, Washington, Wisconsin, British Columbia and Quebec.
Consumers are asked to call the FTC’s Consumer Response Center at 202-326-3128 to report suspected fraud.